Global Semiconductor & Electronic Parts Manufacturing Report 2024

Global Manufacturing • C2524-GL Global Semiconductor & Electronic Parts Manufacturing Demand intensifies: for semiconductor manufacturers, the only thing faster than innovation is the race to keep up with it. Evan Jozkowski Published December 2024 2024 IBISWorld. All Rights Reserved www.ibisworld.com About IBISWorld specializes in industry research with coverage on thousands of global industries. Our comprehensive data and indepth analysis help businesses of all types gain quick and actionable insights on industries around the world. Busy professionals can spend less time researching and preparing for meetings, and more time focused on making strategic business decisions Global Manufacturing • C2524-GL Global Semiconductor & Electronic Parts Manufacturing Table of Contents Standard Report 1. About ........................................................................................................ 1 International Trade ................................................................................. 16 Definition ...................................................................................................... 1 Imports ....................................................................................................... 16 ............................................................................................................ 1 Exports ........................................................................................................ 17 ......................................................................................... 1 5. Geographic Breakdown ................................................................................................... 1 Key Takeaways ..................................................................................... 1 Business Locations ............................................................................................ 2 6. Competitive Forces Codes What's Included Companies Related Industries Related Terms Additional Resources 19 19 ................................................................................ Key Takeaways ........................................................................................ Concentration .......................................................................................... 21 ................................................................................................... 3 Barriers to Entry ..................................................................................... 22 .............................................................................................. 23 3 Substitutes ........................................................................... 3 Buyer & Supplier Power Key External Drivers ............................................................................... 3 .......................................................................................... ........................................................................................................... 4 8. External Environment Key Takeaways ............................................................................................ Industry Structure ................................................................................... Executive Summary ...................................................................... 24 7. Companies .......................................................................................... 26 3 Key Takeaways ....................................................................................... 26 4 Companies ............................................................................................... 32 ....................................................................................... 32 ................................................................................................. 32 ................................................................................ 4 Key Takeaways ........................................................................................ 5 Highlights Key Takeaways .......................................................................................... 5 External Drivers 5 Regulation & Policy Performance Snapshot .......................................................................... Current Performance ..................................................................................... .............................................................................. ............................................................................... 7 Assistance Volatility ...................................................................................................... 9 9. Financial Benchmarks Outlook ............................................................................................... ....................................................................................... 36 ................................................................................................. 36 10 Key Takeaways 11 Highlights 4. Products and Markets .................................................................... 13 Cost Structure ......................................................................................... 13 Key Ratios .................................................................................................. 13 10. Key Statistics .......................................................................... 13 Industry Data .......................................................................................... 15 11. Key Success Factors Major Markets 34 36 ...................................................................................................... Products and Services 32 33 ................................................................... Life Cycle .................................................................................................... Key Takeaways 26 .................................................................... 3. Performance 3 21 2 3 Products and Services Highlights 21 .............................................................................. Major Players SWOT 19 ......................................................................... ........................................................................................... 2. At a Glance Highlights ................................................................. ........................................................................................ ........................................................................................ ................................................................................................ 36 37 .................................................................................. 39 .......................................................................................... 39 ...................................................................... 41 Global Manufacturing • C2524-GL Global Semiconductor & Electronic Parts Manufacturing About This Industry Definition This industry manufactures electronic components, which are typically packaged in a discrete form with two or more connecting leads or metallic pads. Connecting these parts by soldering them to a printed circuit board creates an electronic circuit. A semiconductor device is an electronic component made with semiconductor material, such as silicon. Codes What's Included • Semiconductor manufacturing • Bare printed circuit board and printed circuit assembly manufacturing • Capacitor manufacturing • Coil, transformer and other inductor (electronic) manufacturing • Connector manufacturing • Electron tube and part manufacturing • Liquid Crystal Display unit screens manufacturing • Resistor manufacturing • Transistor manufacturing • Other electronic component manufacturing Companies • Taiwan Semiconductor Manufacturing Company • Intel • Samsung • Qualcomm • Broadcom • SK Hynix • Micron Technology Related Industries Domestic industries Competitors Complementors • Global Consumer Electronics Manufacturing • Global Household Cooking & Appliance Manufacturing • Global Computer Hardware Manufacturing • Global Automobile Engine & Parts Manufacturing International industries • Semiconductor & Circuit Manufacturing in the US • Circuit Board & Electronic Component Manufacturing in the US • Semiconductor & Other Electronic Component Manufacturing in Canada • Audio Visual Electronic Equipment Manufacturing in Australia • Electronic Component Manufacturing in the UK • Loaded Electronic Board Manufacturing in the UK • Semiconductor Manufacturing in China • Integrated Circuit Manufacturing in China • Printed Circuit Board Manufacturing in China 1 www.ibisworld.com December 2024 Global Manufacturing • C2524-GL Global Semiconductor & Electronic Parts Manufacturing Related Terms INTEGRATED CIRCUIT A miniaturized electronic circuit (consisting of semiconductor devices and passive components that has been manufactured in the surface of a thin substrate of semiconductor material. MICROPROCESSOR The central processing unit (CPU) of a computer system, microprocessors process system data and controls other devices in the system. PRINTED CIRCUIT BOARD (PCB) An electrically insulated board onto which electrical components are assembled and wired together. PASSIVE ELECTRONIC COMPONENTS Used to store, filter or regulate electric energy, and include capacitors, resistors and inductors. These components do not require power to operate. SEMICONDUCTOR A material, such as silicon, that has an electrical resistivity between that of a conductor and an insulator. DYNAMIC RAM Most common kind of random access memory for personal computers, the PC processor can access any part of the memory directly and its storage cells must be refreshed every few milliseconds. LIGHT-EMITTING DIODE A semiconductor device that emits visible light when an electric current passes through it DIODE A device that conducts current in only one direction, and only when the cathode voltage is positive relative to the anode voltage by a specified amount. DOPING A process that introduces impurities into an extremely pure semiconductor for the purpose of modulating its electrical properties. NAND MEMORY Also known as flash memory, it is a nonvolatile computer storage chip that can be electrically erased and reprogrammed. Additional Resources • Semiconductor Industry Association • World Semiconductor Trade Statistics • IHS Markit • IPC - Association Connecting Electronics Industries • US Census Bureau 2 www.ibisworld.com December 2024 Global Manufacturing • Global Semiconductor & Electronic Parts Manufacturing At a Glance Revenue $1.0tr Employees ’18-’23 4.7 % ’23-’28 4.1 % ’18-’23 11.3 % Profit $181.2bn 2m Businesses ’18-’23 1.6 % ’23-’28 2.9 % ’18-’23 7.8 pp Profit Margin 17.9% 20,880 ’18-’23 3.2 % ’23-’28 1.6 % ’18-’23 4.0 % Wages $145.4bn ’23-’28 3.5 % Five-year growth rates display historic and forecast CAGRs  Major Players Company  Key External Drivers Revenue Market Share Taiwan Semiconductor Manufacturing Company $69.1bn 6.8% Intel $40.7bn 4.0% Samsung $39.7bn 3.9% Qualcomm $35.8bn 3.5% Other Companies $826.8bn 81.7% Impact Global aggregate private investment Positive Total value of world trade Positive Global internet usage Positive Global research and development funding Positive World GDP Positive Key Takeaways  Products and Services 3 Key External Drivers Performance Item Revenue Market Share Printed circuit assembly $211.5bn 20.9% Logic semiconductors $181.2bn 17.9% Memory semiconductors $93.1bn 9.2% Analog semiconductors $82.0bn 8.1% Electronic connectors and inductors $57.7bn 5.7% Bare printed circuit boards $42.5bn 4.2% Other semiconductors $177.1bn 17.5% • 5nm and 3nm process nodes have boosted chip performance. Manufacturers have enhanced device capabilities and energy efficiency without significantly changing the physical size of chips. • Downstream innovation has driven growth. Semiconductor and electronic parts manufacturers have worked closely with automakers, consumer electronics manufacturers, AI companies and other manufacturers to produce cutting-edge technology. • Companies must navigate an increasingly complex regulatory environment. As tensions between the West and China heat up, companies are fleeing Chinese markets. External Environment • Manufacturers face heavy global regulations. Trade tensions between China and the United States have influenced the industry, causing significant upheaval. • Many governments are readily investing in new semiconductor foundries. For example, the United States, European Union, China and Malaysia have set policies to encourage foreign investment. www.ibisworld.com December 2024 Global Manufacturing • Global Semiconductor & Electronic Parts Manufacturing  SWOT Strengths Executive Summary Demand intensifies: for semiconductor manufacturers, the only thing faster than innovation is the race to keep up with it. High Profit vs. Sector Average Low Customer Class Concentration Low Product/Service Concentration High Revenue per Employee Weaknesses High Capital Requirements Opportunities High Revenue Growth (2018-2023) High Revenue Growth (2023-2028) High Performance Drivers Threats Low Outlier Growth  Industry Structure Characteristic Level Concentration Low Barriers To Entry High Steady Moderate Increasing Regulation and Policy Life Cycle Revenue Volatility 4 Trend Mature High Assistance Moderate Increasing Competition Very High Increasing Innovation Very High Global semiconductor manufacturers are experiencing rising demand from downstream consumer electronic, automobile, computer and industrial machinery companies as digital platform adoption and AI development have increased. Competition is rising globally, as the United States and Europe have made significant investments to catch up to Asian nations who lead in developing advanced 5nm and 3nm nodes. Despite the continuous increase in the need for chips, trade conflicts between the West and China, combined with economic disruptions, have led to supply chain inefficiencies, causing revenue to shrink at an expected CAGR of 1.1% to $1.1 trillion through the current period. A significant drop of 13.4% during 2023 stemmed from economic slowdowns in regions such as the UK and in 2024, revenue returned to growth, surging 3.3%. Profit will total 22.9% of revenue in 2024, declining due to the costly nature of developing smaller nodes. The commodity-like nature of semiconductors has fueled the industry's hectic growth pattern. As process nodes shrink, manufacturing has become increasingly more complex and challenging. Architects continuously adjust designs to accommodate miniaturization requirements while thermal management innovation is also becoming crucial. Through the outlook period, companies will develop more powerful semiconductors and bolster revenue. In particular, manufacturers will strive to meet smaller, more functional product requirements. The continued rise of the Internet of Things (IoT) systems and autonomous vehicles will strengthen demand for semiconductors and electrical parts. Revenue will swell at an expected CAGR of 3.7% to $1.3 trillion through 2029. Governments worldwide will continue to prioritize capacity investment, integrating AI and new manufacturing approaches into operations, especially as 2nm and sub-2nm node technology emerge. Potential conflicts with China threaten the stability of the industry however, as a full-scale invasion of Taiwan could lead to a collapse in the market. www.ibisworld.com December 2024 Global Manufacturing • C2524-GL Global Semiconductor & Electronic Parts Manufacturing Performance Key Takeaways 5nm and 3nm process nodes have boosted chip performance. Manufacturers have enhanced device capabilities and energy efficiency without significantly changing the physical size of chips. Downstream innovation has driven growth. Semiconductor and electronic parts manufacturers have worked closely with automakers, consumer electronics manufacturers, AI companies and other manufacturers to produce cutting-edge technology. Companies must navigate an increasingly complex regulatory environment. As tensions between the West and China heat up, companies are fleeing Chinese markets. Performance Snapshot Revenue Total value ($) and annual change from 2010 – 2028. Includes 5-year outlook. 1.5 24% Forecasted Revenue 1.2 16% $1.0tr 0.9 8% 0.6 0% 0.3 -8% 0 -16% ’18-’23 4.7 % ’23-’28 4.1 % 2023 Revenue Growth 13.8 % Decreasing Revenue Volatility 2010 2012 2014 2016 2018 2020 Annual Revenue ($tr) 2022 2024 2026 High 2028 Change (%) Source: IBISWorld 5 www.ibisworld.com December 2024 Global Manufacturing • C2524-GL Global Semiconductor & Electronic Parts Manufacturing Employees Total number of employees and annual change from 2010 – 2028. Includes 5-year outlook. 3,000,000 24% Forecasted 2,400,000 16% 1,800,000 8% 1,200,000 0% 600,000 -8% Employees 2m ’18-’23 1.6 % ’23-’28 2.9 % Employees per Business 104 ’18-’23 1.6 % ’23-’28 1.3 % Revenue per Employee 0 -16% 2010 2012 2014 2016 2018 Annual Employees 2020 2022 2024 2026 2028 $468k ’18-’23 3.1 % ’23-’28 1.2 % ’18-’23 3.2 % ’23-’28 1.6 % Change (%) Source: IBISWorld Businesses 20,880 Employees per Business 104 ’18-’23 1.6 % ’23-’28 1.3 % ’18-’23 1.5 % Revenue per Business $48.5m 6 www.ibisworld.com ’23-’28 2.5 % December 2024 Global Manufacturing • C2524-GL Global Semiconductor & Electronic Parts Manufacturing Profit Margin Total profit margin (%) and annual change from 2010 – 2028 40% 45pp 32% 30pp 24% 15pp 16% 0pp 8% -15pp 0% -30pp Total Profit $181.2bn ’18-’23 11.3 % Profit Margin 2010 2012 2014 2016 Profit Margin (%) 2018 2020 17.9% ’18-’23 7.8 pp Profit per Business $8.7m 2022 Change (pp) Source: IBISWorld Current Performance  2018-23 Revenue CAGR -4.7% What's driving current industry performance? Manufacturers introduce a series of innovations as demand grows • The need for passive electronic components like capacitors, resistors, connectors and inductors is rising as they store, filter and regulate electric energy across various industries. Automotive, medical, aerospace and defense sectors have increasingly adopted these components. Meanwhile expanding networks and digital entertainment in telecommunications and consumer electronics markets have also increased demand for multilayer semiconductors. • The shift to 5nm and 3nm process nodes has enhanced chip power, efficiency, and compactness, which is crucial for AI and 5G. These advances improve device capabilities and energy efficiency without notably altering physical size constraints. Since 2020, TSMC's N5 5nm nodes supply companies like Apple, while its 3nm nodes, produced since 2022, assist AMD and NVIDIA in boosting next-generation chip performance. • As process node sizes shrink, chip design complexity has grown. Architects are experimenting with multi-core and heterogeneous computing, combining diverse cores for optimal workloads, alongside specialized accelerators like GPUs and AI chips. Advanced packaging, including 3D stacking and chiplets, has boosted performance by integrating components without shrinking individual transistors, maximizing smaller nodes' potential without altering sizes. • Managing heat and power efficiency in chips has become increasingly challenging. Innovations in thermal management, such as advanced cooling technologies and power systems, have become crucial to preventing overheating. Manufacturers like Intel and AMD have developed solutions like liquid cooling and vapor chamber technologies to ensure optimal chip performance without excessive heat buildup. Asian nations continue to dominate the market while Western countries seek to boost capacity • Despite the pandemic leading to global shortages and supply-chain inefficiencies, low-wage Asian countries such as China, Singapore and Taiwan continue to lead as major semiconductor exporters. Many downstream consumer electronics, computer and automotive manufacturers have factories in the Asia-Pacific region; the industry's manufacturers have moved close to buyers, enabling greater collaboration and creating stronger partnerships. • To counteract declines in global chip-making capacity, the $52 billion CHIPS and Science Act, passed in the US in 2022, has encouraged investment in domestic foundries. Similarly, the European Chips Act, valued at $47 billion, has supported similar initiatives. Post-pandemic, Western nations are boosting domestic fab production to mitigate supply chain vulnerabilities and enhance competition with Asian markets. • According to the Semiconductor Industry Association, US FAB capacity reached 10% as of 2022 and avoided a drop to 8% because of the legislation. In 2022, semiconductor sales from the Americas increased by 16%, while Chinese semiconductor sales decreased by 6%. 7 www.ibisworld.com December 2024 Global Manufacturing • C2524-GL Global Semiconductor & Electronic Parts Manufacturing Patent conflicts and geopolitical tensions with China have altered trade conditions • Companies in various countries have accused China of stealing patent information. In particular, ASML, the only manufacturer in the world making extreme ultraviolet (EUV) photolithography machines, used to turn wafers into semiconductors, has alleged that Chinese workers stole confidential information. This conflict has led to sanctions on Chinese products. • In 2022, the United States took decisive steps to distance itself from China's semiconductor sector. After signing the CHIPS Act, the US banned the sale of advanced computer chips used in AI and supercomputers to China, highlighting a significant shift in tech policy. • The Netherlands and Japan have also restricted exports of advanced chips to China, while Taiwan has banned Chinese companies, such as Huawei, from contracting its chip manufacturers. As tensions increase, companies have relocated production from China to Vietnam, Malaysia, Singapore and the US. These measures have curbed China's technological advancement in chip-making and hindered its integration into international supply chains. • With the global semiconductor market increasingly taking action against the country, the Chinese government fired back in May of 2023, announcing a ban on products from Micron, a US-based semiconductor company, citing undisclosed national security issues. Consolidation has increased in recent years • Companies have actively consolidated, acquiring strategic competitors. The deals often focus on acquiring new technology or patents. Most of the industry's consolidation has occurred between leading players and smaller companies as they seek new methods to gain market share and solidify positions in niche technology. • SK Hynix's acquisition of Intel's NAND memory business in 2020 and Renesas Electronics’ purchase of Dialog Semiconductor for $5.9 billion highlight the ongoing industry trend toward consolidation and expansion. In 2022, Amkor Technology completed the acquisition of the remaining shares of J-Devices, a major outsourced semiconductor assembly and test (OSAT) provider in Japan, to fully integrate it into its operations. • Manufacturers relating to autonomous and electric vehicles have also been active in M&A markets. In 2021, Qualcomm boosted its presence in autonomous vehicle technology by acquiring Arriver, the driving assistance software platform from Veoneer. This acquisition sought to enhance Qualcomm's Snapdragon Ride platform, providing a comprehensive solution for autonomous driving systems and strengthening its competitive position in the rapidly evolving market. 8 www.ibisworld.com December 2024 Global Manufacturing • C2524-GL Global Semiconductor & Electronic Parts Manufacturing Volatility High What influences industry volatility? Semiconductors are highly commoditized • Some areas of semiconductor devices, especially within random access memory markets, like dynamic random access memory (DRAM), random access memory (RAM) and static random access memory (SRAM) sales, face heavy exposure to price fluctuations, acting akin to commodities and dictating industry trends. • The consumer electronics and computer markets freely shift alongside consumer sentiment. As more people gain internet access and consumer spending rises, these markets will exhibit increased stability, limiting volatility. Yearly innovation can ripple through the market • Many products, especially logic chips, undergo yearly releases, creating a fast-paced, unpredictable market. Companies that lag on innovation will endure heavy volatility. This trend is especially true as electronics go through faster update cycles. • For example, Intel, NVIDIA and AMD release yearly graphics processing units (GPUs) and central processing units (CPUs), primarily relying on contract manufacturers, to jockey for market share. Recently, Intel's releases have performed poorly against AMD, causing Intel's revenue to plummet. Intel's latest 13th-generation GPU represents yet another volatile innovation cycle. Specialized manufacturers face downturns • Many manufacturers specialize in a single product or market, making them susceptible to shifts in demand or disruptive new products. For example, SK Hynix's new partnership with NVIDIA to produce HBM3 DRAM has vaulted the company past traditional memory market leader Samsung. • Many companies invest heavily in making chips for autonomous vehicles. These semiconductor manufacturers will struggle if automakers scrap these projects or face setbacks. For example, an Uber self-driving car hit a pedestrian in 2018, leading to suspended testing and creating a semiconductor production backlog. • Many companies also produce logic chips for artificial intelligence (AI) computing. Many governments are floating AI restrictions and regulations that could stifle manufacturers' growth. This technology is in its infancy, but the US government has already drafted regulations pertaining to AI development and self-sufficiency. 9 www.ibisworld.com December 2024 Global Manufacturing • C2524-GL Global Semiconductor & Electronic Parts Manufacturing Hazardous High Roller Coaster Stagnant Blue Chip Volatility Hazardous Low Industry volatility vs. revenue growth (2018-2024 CAGR) Below GDP growth Above GDP growth Revenue Growth Source: IBISWorld  Key Success Factors How do successful businesses overcome volatility? Adapt quickly to changing regulations Manufacturers must adhere to a varying array of regulations globally. Companies must rapidly adapt to shifting labor and environmental regulations and the latest trade war between the US and China alongside China's Micron ban are examples of rapidly changing regulations. Have a well-defined strategy Manufacturers must develop clear strategies and focus on core competencies to remain competitive. Rapid innovation creates an environment where competitors can quickly overtake others, requiring a directed and well-thought-out strategy. Outlook  2023-28 Revenue CAGR +4.1% What's driving the industry outlook? Governments will continue to invest in manufacturing expansion as competition increaseses globally • Driven by the CHIPS and Science Act, between 2022 and 2032, the United States is on pace to achieve a 203% increase in chip fabrication plant production capacity, while the EU aims to double its global market share to 20% by 2030. Canada lags in investment, though it is likely to pursue a chip partnership with the United States in the years ahead. • Japan will invest $7.5 billion to boost its semiconductor industry and reduce its reliance on imports. A new chip plant in Kumamoto with TSMC will focus on automotive and industrial applications. Similarly, South Korea's "K-chips Act" will offer tax credits and the country will develop a $350 billion semiconductor mega-cluster near Seoul. • In its pursuit of technological self-reliance, China will invest over $100 billion in firms like SMIC to advance next-generation semiconductor nodes. By 2025, the goal is for 70% of its semiconductor needs to be met domestically. Investment in raw material operations and fabrication equipment innovation will also increase, as the country aims to establish a fully integrated domestic supply chain. Next generation product offerings will rapidly emerge • Building on 3nm technology, manufacturers will invest heavily in developing 2nm nodes in the years ahead. Manufacturers will face challenges continuously innovating using traditional silicon design methods and will need to leverage new classes of ultraviolet lithography 10 www.ibisworld.com December 2024 Global Manufacturing • C2524-GL Global Semiconductor & Electronic Parts Manufacturing (EUVL) machines. Though extremely challenging to develop, 2nm and sub-2nm nodes will be crucial for high-performance computing applications, AI software and data centers moving forward. • As the premier chip developer in the market, TSMC is at the forefront of developing 2nm process nodes and plans to begin mass production after 2024. Meanwhile, Samsung targets production of 2nm nodes by 2025 and aims for sub-2nm nodes by 2027. • As manufacturing activity advances to producing 2nm and sub-2nm nodes, resource consumption will surge. . To address this, fabs will integrate 6D BIM to simulate energy use, optimize facility layouts and enhance resource efficiency. Retrofitting older plants with green technologies and building new greenfield sites will yield environmental benefits amid rising demands for sustainable practices. • Due to the complexity and costs of smaller monolithic chips, many companies will turn to chiplets, dividing processors into smaller interconnected dies to cut costs and risks. Despite their advantages, chiplet adoption will face short-term limitations because of supply chain complexities and fragmentation challenges, according to the Wall Street Journal. This suggests a gradual adoption rate in the industry. AI will shape manufacturing processes moving forward • Advanced AI tools are set to significantly alter semiconductor manufacturing operations in the future. Deloitte reports that 70% of executives view generative AI as a transformative business tool. Among these leaders, 28% believe AI's role in enhancing operations and equipment performance will offer the most value. Meanwhile, 18% consider AI-driven predictive maintenance and diagnostic solutions to be crucial as well. • In the coming years, companies like Siemens and IBM will also invest in integrated database systems to unify data across business units and vast supply chains. Deloitte reports that data modernization, unified platforms and advanced analytics will be paramount. Incorporating next-gen SaaS will ensure data accuracy, optimizing AI and machine learning to enhance operational efficiency and drive future growth. • As automation advances, identifying key skills for supervising sophisticated machinery will become essential. Companies will increasingly focus on specialized training in robotics programming and data analysis for machine oversight. The industry will continue to evaluate areas where human involvement can be safely diminished in fab operations, enabling more fully automated processes to boost production efficiency and operational resilience. China's reunification ambitions with Taiwan pose a threat to the industry's stability • In an evolving geopolitical landscape, China's reunification ambitions regarding Taiwan heighten fears of an invasion. Disruption of Taiwan Semiconductor Manufacturing Company (TSMC), a pivotal global player, poses significant risks. According to the economist, Taiwan has a 68% global market share of semiconductor production and produces 90% of the world's most advanced chips. • A Chinese takeover of Taiwan could lead to potential semiconductor shortages of all types, which would escalate production costs and delay technological advancements. As companies navigate these challenges, strategic supply chain diversification and investment in domestic semiconductor capabilities will become critical. • Even if China fails to reunify with Taiwan, a potential conflict between the United States and coalition forces in the South China Sea in the future would significantly disrupt maritime trade routes. This scenario would delay not only semiconductor fulfillment orders but also the delivery of rare earth elements like silicon, cobalt, and lithium, which are crucial for chip production. Life Cycle Mature Why is the industry mature? Contribution to GDP Despite declining sharply following the pandemic, the Global Semiconductor and Electrical Parts Manufacturing industry provides an indispensable product with complete market acceptance. Market Saturation The industry is highly fragmented since each product line has specific standards, requiring intensive research and development (R&D) and unique production methods. For example, Intel and AMD dominate the central processing unit (CPU) market, leaving little room for entrants. Start-up costs are also extensive, limiting saturation. Innovation Product and manufacturing technologies change rapidly in this industry, driven by competition and innovation. Most manufacturers devote much of their revenue to R&D. R&D expenditures enable the creation of high-tech advancements, driving demand. Consolidation 11 www.ibisworld.com December 2024 Global Manufacturing • C2524-GL Global Semiconductor & Electronic Parts Manufacturing Companies have readily consolidated. Many manufacturers target smaller companies with cutting-edge technology. For example, Intel acquired Tower Semiconductors, and AMD acquired Xilinx in the industry's largest deal ever in 2022. Similarly, SK Hynix has acquired part of Intel's memory business. Technology & Systems The semiconductor fabrication process is a multistep sequence of photographic- and chemical-processing steps during which companies gradually create electronic circuits on a wafer made of pure semiconducting material. Companies invest in cutting-edge lithographic and other fabrication machines for more precise and efficient production. Many companies have enlisted help from artificial intelligence and automation to streamline design and production. Life Cycle Indication of the industry’s stage in its life cycle compared to similar industries Life cycle stage Quantity Growth Quality Growth Maturity Annual Revenue Decline *Growth is based on change in share of economy combined with change in establishment numbers Source: IBISWorld 12 www.ibisworld.com December 2024 Global Manufacturing • C2524-GL Global Semiconductor & Electronic Parts Manufacturing Products and Markets Key Takeaways Companies rely on innovation. Many manufacturers produce new variations of processors and memory cores to meet customers' needs and remain ahead of the competition. Desktop, laptops and phones drive semiconductor sales, but industrial, government and commercial buyers are starting to order more chips yearly. These electronics find uses in civil projects, defense contracts, vehicles, satellites and other operations. Demand from communications and consumer electronics manufacturers has skyrocketed. As the usage of digital platforms accelerates, these markets have bolstered semiconductor and electric parts demand. Largest Market $211.5bn Product Innovation Very High Printed circuit assembly Products and Services How are the industry’s products and services performing? Rapid innovation spurs the logic semiconductors segment • Buyers use logic chips to control the operations of digital devices by processing digital data. In particular, logic semiconductors include central processors (CPUs) and graphics processing units (GPUS), commonly used in consumer electronics and PCs. • The demand for logic semiconductors has surged because of advancements in AI and machine learning. Industries are increasingly integrating AI capabilities into devices, necessitating powerful processing units like GPUs and specialized logic chips. Self-driving vehicles rely on GPUs and CPUs, and companies have developed data processing units (DPUs) to offload intensive tasks from the CPU. • SIA reports that logic chip sales increased 1.1% over 2023 (latest data). Rising competition from Advanced Micro Devices (AMD) and Taiwan Semiconductors (TSMC), which produces Apple and NVIDIA processors, has led to rapid technological innovation, encouraging consumers to upgrade electronics and spurring demand for logic semiconductors. Memory semiconductors benefit from steady innovation • Manufacturers design memory chips capable of holding data and programs temporarily or permanently, depending on function. These chips include random access memory (RAM) and solid-state drives (SSDs). This segment doesn't include memory protection units (MPUs) and memory management units (MMUs). • Most RAMs are volatile memory, deleting all data when powered down; most SSDs are nonvolatile storage and keep data over a device's lifetime. Since RAM is replaceable and upgradeable on personal computers, many consumers and businesses have purchased RAM upgrades over the past five years. • The rise in cloud storage and services has fueled demand for memory semiconductors, driven by the need for efficient, highperformance storage solutions. Innovations in memory technologies, like higher density and energy efficiency in DRAM 13 and NAND flash memory, stem from efforts to create smaller, more efficient consumer devices. • Even so, SIA reports that memory chip sales declined 28.9% over 2023 (latest data). The commodity-like nature of semiconductors can dramatically change yearly and quarterly product breakdowns. For example, logic semiconductors overtook memory in 2022 as Intel's new 13th-generation processors hit the market. Analog semiconductors remain a vital part of audio transmission • Companies use analog semiconductors in power systems. It includes two-terminal semiconductors that convert or rectify alternating current (AC) into direct current (DC). Integrated circuits (ICs) are microelectronics semiconductor devices comprising many interconnected transistors and other components. • The proliferation of Internet of Things (IoT) devices and smart technology has driven demand for analog semiconductors, essential for translating physical parameters into electrical signals. The rise in EV production has increased the need for power management and conversion systems, leading to greater demand for analog semiconductors. • Companies widely use analog semiconductors for voice and music systems, like public address systems, speakers and amplifiers. However, in many cases, buyers are replacing analog chips with their digital counterparts. As a result, SIA reports that analog semiconductor sales decreased 8.8% in 2023 (latest data available). Other semiconductors provide a wide variety of uses • Semiconductors and related products include semiconductors, microprocessors, photovoltaic cells, microcircuits and other electrical components. This segment includes discrete, MCU, MPU, MMU, sensor and digital signal processor (DSP) semiconductors and optoelectronics. • Discrete semiconductors are components that typically perform a www.ibisworld.com December 2024 Global Manufacturing • C2524-GL Global Semiconductor & Electronic Parts Manufacturing single function. Optoelectronics are hardware devices that convert electrical signals into photon (or light) signals and vice versa. According to SIA, sensor, DSP, MCU, discrete and opto semiconductor sales have all risen through the current period. Printed circuit assembly remains concentrated in high-tech countries • The printed circuit assembly segment includes computer and peripheral printed board assemblies, communications printing board assemblies, industrial process control board assemblies, instrumentation printed board assemblies for industrial processing and printed board assemblies for consumer electronics. product capabilities, driving growth in tailored PCB solutions. • Other electronic components serve a massive array of consumer and industrial needs. For example, manufacturers sell electronic connectors (e.g. fiber optic connectors), cathode ray tubes and liquid crystal displays (LCDs) to downstream manufacturers for many consumer electronics. Products & Services Segmentation Industry revenue in 2023 broken down by key product and service lines. • Printed circuit assembly requires extremely strict quality control protocols. Companies require skilled, high-wage workers to manage quality assurance and design, so technologically advanced nations, like the United States, Taiwan and South Korea, dominate this market. • Automation in manufacturing processes, including printed circuit assembly, has increased, leading to more efficient production lines and higher-quality electronic components. To speed up production and reduce costs, there is a trend towards standardizing components across different platforms and devices. Other passive and interconnecting electronic components remain a stable revenue source • Bare printed circuit boards (PCBs) include those without mounted electronic components involving print, perforate, plate, screen, etch or photo print interconnecting pathways for electric current on laminates. Bare PCBs require less skilled labor for design and production, meaning many production facilities are in low-wage countries, such as China and Malaysia. • Demand for customized printed circuit boards (PCBs) is increasing as industries look for greater flexibility in electronics applications. This trend spans from consumer electronics to industrial machines. Companies aim to adapt quicker to market needs and enhance Printed circuit assembly ($211.5bn) Logic semiconductors ($181.2bn) 20.9% 17.9% Memory semiconductors ($93.1bn) 9.2% Analog semiconductors ($82.0bn) 8.1% Electronic connectors and inductors ($57.7bn) Bare printed circuit boards ($42.5bn) Other semiconductors ($177.1bn) 17.5% Other electronic components ($167.0bn) What are innovations in industry products and services? 5.7% 4.2% 16.5% Source: IBISWorld Very High Advanced process technologies and chiplets • Companies have advanced their manufacturing processes beyond 5nm to 3nm nodes and are exploring smaller dimensions, enabling more powerful and energy-efficient chips. The evolution toward 2nm and sub-2nm node semiconductor manufacturing involves numerous technological challenges and advancements in lithography, materials and design. • Samsung has announced its initiative to produce 2nm chips, utilizing its proprietary GAA transistor technology, Multi-Bridge-Channel FET (MBCFET). Meanwhile, TSMC plans to utilize its EUV lithography and advanced transistor architectures to produce 2nm and sub-2nm chips. • Chiplet technology has also matured as manufacturers look for opportunities to become more flexible. This allows different processing and memory functions to be integrated into a single package, improving performance and scalability while reducing costs. AI optimizes production • Many companies have integrated artificial intelligence (AI) programs to support production, ranging from design to quality control. Companies have also partnered with leading AI innovators to create more powerful chips to run more complex programs, creating new growth opportunities. • AI can streamline tedious design processes, giving engineers more research and development time. Similarly, AI can read sensor data more efficiently, improving product quality and reducing production downtime. 14 www.ibisworld.com December 2024 Global Manufacturing • C2524-GL Global Semiconductor & Electronic Parts Manufacturing  Key Success Factors What products or services do successful businesses offer? Be an early adopter of new technologies This industry produces products incorporating a high level of technology, which advances rapidly. In addition, production processes can involve a high level of technology. Access to the latest technology is essential. Develop new products Manufacturers develop, produce and supply complex components often incorporated into complex end products. Production of these components often requires complex production technologies and highly skilled staff. Major Markets What’s influencing demand from the industry’s markets? Computer and peripheral equipment manufacturers benefit from growing global internet connectivity • The computer and peripheral equipment manufacturers segment includes companies that manufacture computers, laptops, servers, monitors and other computer-related devices. Computer manufacturers use semiconductors, namely central processing units (CPUs), graphics processing units (GPUs) and memory chips, alongside LED-related products and other electronic components. • The economy's shift to digital platforms has boosted revenue for this segment through the second half of the current period, driven partially by a shift of the global workforce to remote operations. Rising global internet usage and consumer spending have encouraged consumers to buy new computers. 5G network implementation bolsters demand from communications and network equipment manufacturers • Communication and network equipment manufacturers create communications and network equipment, including cell phones, smartphones, routers and modems. The increasing prevalence of mobile devices and rising internet connectivity worldwide has facilitated increased demand from this segment. • Demand from network equipment manufacturers has started to slow because most developed economies already have network infrastructure in place, causing this segment to contract slowly. • Still, introducing fifth-generation (5G) wireless technologies will buoy industry sales to this market segment over the coming years, with many of the most advanced economies already accelerating their 5G rollout. The transportation sector faces chip shortages following the pandemic • The rising number of electric vehicle (EV) sales has increased demand from automotive manufacturers for semiconductor and electrical component companies. Many automakers have implemented more luxurious and intuitive driving and assistance systems to entice new customers. This trend has required complex electronic components and semiconductors, particularly for semiautonomous and autonomous driving programs. • Many manufacturers will partner with transportation companies to 15 fulfill particular needs and develop new, effective self-driving systems. For example, General Motors announced a strategic partnership with Wolfspeed, a growing American semiconductor company, for new EVs. • In 2020, this segment fell as supply chain inefficiencies related to the pandemic led to a sharp drop in automobile sales. Manufacturers shifted to supply more chips to other downstream markets, like consumer electronics manufacturing. The automotive sector's rapid recovery following the pandemic led to a major chip shortage, causing car prices worldwide to skyrocket. Consumer electronics manufacturers develop advanced and interconnected products • Increased use of internet-enabled devices has led to rising demand for products embedded with chips and sensors. This segment has expanded as many consumers in developed nations adopt smart home technology. Many consumer products, such as thermostats and lights, increasingly contain chips as the technological complexity and functionalities of these products become more comprehensive. • Semiconductors and electronic components used in computers, communications and networking equipment are often more advanced and expensive. In comparison, products in this market are less expensive because downstream consumers are often more price-sensitive when buying household appliances. Manufacturers serve a wide variety of other markets • Other sources of demand include general industrial markets and military and government clients. This segment comprises electronic equipment manufacturers but also focuses on particular machinery uses. • Most of these products are used in major infrastructure projects, defense applications and industrial production, including the mining and energy sectors. For example, demand from healthcare machinery manufacturers has increased as more hospitals adopt advanced products, namely robotic surgery equipment or monitoring devices. • Demand from the defense sector can be particularly volatile, especially if companies have foundries in non-allied nations. For example, China has recently banned Micron, citing a national www.ibisworld.com December 2024 Global Manufacturing • C2524-GL Global Semiconductor & Electronic Parts Manufacturing security risk. Major Markets Segmentation Industry revenue in 2023 broken down by key markets Communications and network equipment manufacturers ($302.6bn) 29.9% Computer and peripheral equipment manufacturers ($295.5bn) Transportation sector ($142.7bn) Consumer electronics manufacturers ($137.7bn) Other ($133.6bn) 29.2% 14.1% 13.6% 13.2% Source: IBISWorld International Trade Imports Moderate Increasing What are the industry’s import trends? China attempts to reduce dependency on foreign semiconductors • China lacks foundries to produce advanced chips for AI, defense and other cutting-edge technologies. The country relies on Taiwanese semiconductors for most of these chips; however, in recent years, the US has stepped in with export controls to control China's access to cutting-edge semiconductor technology. • After ASML accused Chinese employees of stealing chip and technology data for its lithographic machines, China is now restricted from importing advanced lithography machines made by Dutch companies such as ASML. Japan has also implemented export controls on chipmaking technologies and materials, aligning with the US and Netherlands' efforts. • To maintain its supply of advanced semiconductors, China has significantly increased investment in its domestic semiconductor industry, aiming to enhance self-sufficiency through government funding and initiatives like the Made in China 2025 plan. The country has also threatened to invade Taiwan which would ultimately lead to the country taking over its semiconductor industry. • In May of 2023, the Chinese government banned imports from US chip maker Micron. The Cyberspace Administration of China cited Micron's failure to pass a security review, although the specific security risks were not detailed publicly. US policy pushes manufacturers to open foundries in the United States • Following the passing of the CHIPS and Science Act in the United States, TSMC and Samsung have opened or announced new facilities, signaling the country's intention to reduce its reliance on foreign products after semiconductor shortages damaged post-pandemic economic recovery. • In 2023, ON Semiconductor Corporation opened a new $1.3 billion semiconductor fabrication plant in upstate New York, reflecting a trend of manufacturers locating near downstream partners. This move aims to streamline production and efficiency, potentially reducing trade complexities. • Additional projects aimed to reduce the US' reliance on imports include Texas Instrument's $30 billion project to expand its capabilities in Texas and Intel's plan to build a new $20 billion manufacturing complex in Ohio. 16 www.ibisworld.com December 2024 Global Manufacturing • C2524-GL Global Semiconductor & Electronic Parts Manufacturing International Trade: Imports Concentration of imports and exports from each country based on industry revenue: Total Imports $222.6bn ’18-’23 6.0 % ’23-’28 2.4 % ’18-’23 6.0 % ’23-’28 2.4 % Total Exports $222.6bn Trade Balance Balanced : $0 Value $0bn $12kbn $24… $36… $48… $60… $72kbn Source: IBISWorld Exports Moderate Increasing What are the industry’s export trends? Asian countries dominate production • China, South Korea and Taiwan are the leading global exporters of semiconductors. These Asian countries play critical roles in the electronics supply chain and contribute significantly to technological advancements. • As the demand for advanced technologies such as 5G, AI and IoT grows, the demand for advanced semiconductors has increased significantly. This has led to increased exports of high-tech chips capable of supporting these technologies, primarily from Taiwan and South Korea. • Taiwan Semiconductor Manufacturing Company (TSMC) and Samsung, leading semiconductor manufacturers, are headquartered in Taiwan and South Korea, respectively. While Samsung operates in China, its focus is on-chip assembly and testing rather than wafer fabrication. It emphasizes the latter stages of production, including packaging and verification processes. US and China tensions affect export trends • After years of rising tensions between the two countries, the US banned the export of advanced computer chips essential for AI and supercomputers to China in 2022. This strategic move marked a significant change in US tech policy and is aimed at limiting China's access to critical technology. • US-China trade tensions have led to shifts in supply chain strategies, with companies diversifying their manufacturing bases to minimize risks. This has resulted in increased investments and exports from countries like Vietnam and India, which are becoming important nodes in the semiconductor and electronics industry. 17 www.ibisworld.com December 2024 Global Manufacturing • C2524-GL Global Semiconductor & Electronic Parts Manufacturing International Trade: Exports Concentration of imports and exports from each country based on industry revenue: Total Imports $222.6bn ’18-’23 6.0 % ’23-’28 2.4 % ’18-’23 6.0 % ’23-’28 2.4 % Total Exports $222.6bn Trade Balance Balanced : $0 Value $0bn $25kbn $50kbn $75kbn $100kbn $125kbn Source: IBISWorld 18 www.ibisworld.com December 2024 Global Manufacturing • C2524-GL Global Semiconductor & Electronic Parts Manufacturing Geographic Breakdown Key Takeaways Most manufacturers have moved production plants to Asia. Many Asian countries, like Malaysia, China and Singapore, have fewer regulations, enabling companies to cut back on wage costs. Many companies have started to return to North America. The United States has implemented favorable policies, encouraging semiconductor investment throughout the country. Business Locations Where are industry businesses located? Many companies keep headquarters in North America and Europe • Most of the electronics sector has offshored its manufacturing operations to developing countries. The world's largest electronic component companies often have headquarters in developed countries, principally the United States, Japan, South Korea, Taiwan and the Netherlands. In fact, the SIA reports that USheadquartered manufacturers own 48.0% of foreign foundries. • Most of these companies have established manufacturing facilities in low-cost countries, including China and Malaysia, sometimes as joint ventures. • Favorable policy in the United States has encouraged many companies to return to North America. In particular, TSMC and Intel have announced new facilities in Arizona, increasing this region's share of establishments. Many European countries have followed America's example, creating new funding opportunities for tech companies. • Many companies have moved production to low-cost nations, including Malaysia, Singapore and Vietnam. Foundries in these regions often save on labor costs for low-skill positions. • Also, many downstream electronics manufacturers have production facilities in these regions, enabling semiconductor and electronic component manufacturers to cut transportation costs and facilitate purchasing contracts. • Also, increasing political tensions with China, especially regarding weak of patent protection and ongoing trade wars, have encouraged many companies to set up facilities across Malaysia, Vietnam and other low-cost manufacturing nations. Even so, the United States has started pressuring Vietnam to improve workplace standards, which could lead to higher wage costs. The growing relationship between the US and Vietnam may lead to more establishments in the country. Share of Revenue (%) vs. share of population (%) 60% Companies move production to North Asia 15% Southeast Asian nations provide low-cost labor 19 st As ia ic a So ut h Ea Am ce a er ni a h So ut ia O or th As ic a N or th Am er lA en tra C In di a & N a si e Eu ro p M id dl e Ea st 0% & • For example, Chinese companies are building multiple new production facilities in China because of increased government funding. In addition, companies have recruited skilled semiconductor engineers from other countries with high salaries. 30% ca • There is a strong likelihood that North Asia will increase its share of production through the outlook period as recent trade spats with the United States have pushed China to accelerate development of its domestic semiconductor industry. 45% Af ri • The production of final electronics products has largely shifted from developed countries, like Japan, Germany and the United States, to low-cost countries mainly located in Asia. Revenue Population Source: IBISWorld www.ibisworld.com December 2024 Global Manufacturing • C2524-GL Global Semiconductor & Electronic Parts Manufacturing  Key Success Factors How do businesses use location to their advantage? Having contacts within key markets Manufacturers must develop contacts and strong relationships with customers in key markets where end products are manufactured. Be willing to outsource when appropriate Outsourcing can reduce capital costs and enable companies to focus on core capabilities. More semiconductor companies that design and supply chips have chosen to outsource fabrication. 20 www.ibisworld.com December 2024 Global Manufacturing • C2524-GL Global Semiconductor & Electronic Parts Manufacturing Competitive Forces Key Takeaways Price is essential for widely available general-purpose chips. Manufacturers primarily compete on product quality, reliability, selling price, customer service, product range and innovation and timely delivery. Many buyers design electronics around using a specific chip. If that unit is unavailable, switching to a competitor is expensive and time-consuming. High barriers, particularly access to labor and start-up costs, prevent most entrants from succeeding. Companies must also navigate extensive patent law, leading to lower saturation. Concentration Low What impacts the industry’s market share concentration? Companies face high barriers to entry • High barriers to entry lead to a concentrated market share in the industry globally. Companies like Intel, Samsung and TSMC hold a significant market share because of substantial capital requirements, advanced technological expertise and established distribution networks. New entrants face high costs for R&D and infrastructure, making it hard to compete. • These industry giants invest heavily in innovation and maintain strong relationships with key clients, further solidifying their market position. Economies of scale also give them a cost advantage, keeping prices competitive while maintaining profits. Manufacturers explore new partnerships • Semiconductor manufacturers form joint ventures and strategic alliances for manufacturing and R&D, often partnering with automakers to align with market demands. Notable collaborations include Intel with BMW, Samsung with Audi and Nvidia with Tesla, showcasing a trend of tech companies teaming up with automakers to advance automotive technology. range of high-tech products and market segments. High upfront costs and ongoing research and development investments deter companies from easily transitioning between niches, like memory to GPUs, because of the significant financial burdens spanning multiple specialized areas within the industry. • For example, Samsung and SK Hynix have a near-duopoly on high bandwidth memory (HBM), controlling over 90.0% of the addressable market. SK Hynix's recent deal to be the primary supplier of NVIDIA's next-generation DRAM solidifies the company's position in this market. • SK Hynix has steadily built up its position in memory markets, acquiring Intel's NAND and SSD businesses. This acquisition represents a trend of manufacturers solidifying current niches rather than expanding into new territory. Market Share Concentration Combined market share of the four largest companies in this industry 50% 40% • Companies have also readily acquired smaller competitors, accessing new technology and intellectual property alongside increasing their market share. Innovative manufacturers in AI and automotive spaces have become attractive targets for leading manufacturers. • In recent years, major semiconductor and electronic manufacturers have aggressively acquired smaller competitors to expand market share and access new technologies. Notable examples include Samsung Electronics' purchase of Harman to boost its automotive and connected technologies and Intel's buyout of Habana Labs to expand its AI capabilities. 30% 20% 10% 0% 2018 2020 Market share of the four largest companies (%) Manufacturers often dominate specific niches 2022 Sector average (%) Source: IBISWorld • Semiconductor and electronic parts manufacturing encompasses a 21 www.ibisworld.com December 2024 Global Manufacturing • C2524-GL Global Semiconductor & Electronic Parts Manufacturing  Key Success Factors How do successful businesses handle concentration? Economies of scale Large-scale manufacturing plants often achieve lower unit costs than smaller ones. Larger companies can negotiate effectively with suppliers and spread research, development and marketing expenses over a broader sales base, enhancing their competitive advantage. Willingness to outsource Outsourcing fabrication can lower capital costs for semiconductor companies, allowing them to concentrate on core competencies. Increasingly, chip designers and suppliers are opting for this model to optimize efficiency and stay competitive in the industry. Barriers to Entry High Steady What challenges do potential industry entrants face? Legal • Manufacturers confront diverse regulations: EU and North American companies adhere to stringent environmental and workplace laws, while Asian companies face fewer restrictions. Input sourcing and quality standards are pressured by US-China trade tensions, which may lead to product bans. Differentiation • Established manufacturers maintain dominance by securing supply contracts with large customers, reinforcing their market position. Their strong reputations make customers hesitant to switch to new suppliers and technologies, entrenching the established companies' competitive edge. Start-up Costs • The semiconductor industry faces high capital demands, especially in certain segments. Constant machinery upgrades and expensive fabrication plants add to investment risks. Rapid innovation, product obsolescence, price volatility and the need for specialized machinery complicate the landscape. Capital Expenses • Companies struggle to attract skilled employees because of the limited availability and intense competition. Sophisticated and rapidly changing technology demands expertise in R&D, production and sales. Manufacturers face high costs for ASML's lithographic machines and deal with input scarcity.  Key Success Factors How can potential entrants overcome barriers to entry? Secure the latest and most efficient technologies and techniques This industry rapidly advances by integrating highly sophisticated technology into its products and production processes. Given the swift pace of technological advancements, staying competitive depends on access to cutting-edge technology, which is crucial. Secure a highly skilled workforce Manufacturers develop, produce and supply complex components, often incorporated into complex end products. The production of these components often requires complex production technologies and highly skilled staff. Economies of scale Large-scale manufacturing plants often achieve lower unit costs than smaller ones. They negotiate better with suppliers and distribute research, development and marketing costs over a wider sales base. This efficiency enhances their competitive edge in the market. 22 www.ibisworld.com December 2024 Global Manufacturing • C2524-GL Global Semiconductor & Electronic Parts Manufacturing Substitutes Low Steady What are substitutes for industry services? No competition • Semiconductors and electrical components play a crucial, irreplaceable role in data storage and electricity transmission. These technologies ensure efficient processing and handling of information and energy. Their significance in modern infrastructure highlights the limitations other products face, emphasizing their unique contribution to technological advancement and reliability. • The processing power of semiconductors and electronic components is unmatched. They enable rapid computation and efficient energy consumption, pivotal to modern electronics and critical infrastructure. Overall, these products remain the backbone of innovations in computing, telecommunications and automation.  Key Success Factors How do successful businesses compete with substitutes? Establish an efficient funding structure and efficient, cost-effective distribution channels Outsourcing cuts capital costs and lets companies concentrate on core capabilities. Many semiconductor firms that design and supply chips are increasingly opting to outsource fabrication, highlighting a strategic shift in the industry's operational approach. Develop strong technical product knowledge Manufacturers must continually innovate with new value-added products and robust technical expertise to remain competitive. Those lagging in innovation are swiftly outpaced by competitors, risking replacement in an industry where staying ahead is crucial. 23 www.ibisworld.com December 2024 Global Manufacturing • C2524-GL Global Semiconductor & Electronic Parts Manufacturing Buyer & Supplier Power   Suppliers  Buyers 1st tier Global Mining and Oil and Gas Field Equipment Manufacturing Global Alumina and Aluminum Production and Processing Global Copper, Nickel, Lead and Zinc Mining Global Glass and Glass Products Manufacturing Global Semiconductor & Electronic Parts Manufacturing _ 2nd tier 1st tier 2nd tier Global Computer Hardware Manufacturing Global Consumer Electronics Manufacturing Auto Parts mfg Car and Truck mfg Trucks mfg Source: IBISWorld What power do buyers and suppliers have over the industry? Moderate Steady Buyers: semiconductors and electrical components are essential products • Semiconductors and electrical components are essential for manufacturing consumer electronics, computers and vehicles. Companies like Apple and Tesla depend heavily on these for their tech-driven products. These components are critical in enabling advanced features and maintaining competitive advantages in their respective industries. • Even so, heavy competition and rapid product innovation mean companies must price competitively, limiting their power over buyers. Regardless, some markets run as effective monopolies or duopolies, meaning buyers must pay premiums to acquire necessary niche products. High Increasing Suppliers: companies require specialized machinery • The semiconductor and electrical component industry faces significant expenses because of highly specialized machinery. ASML, a Dutch company, uniquely manufactures lithographic presses essential for specific semiconductors. This specialization produces strong supplier power, as these machines are built to precise specifications for individual products. • Companies face challenges purchasing oxides and rare earth metals, with only a few mines globally providing access to specific elements, leading to increased supplier power. Many of these mines are in China and as sanctions against the nation strengthen, companies may need to source rare earth metals from other countries. 24 www.ibisworld.com December 2024 Global Manufacturing • C2524-GL Global Semiconductor & Electronic Parts Manufacturing  Key Success Factors How do successful businesses manage buyer & supplier power? Secure the latest and most efficient technologies and techniques The industry rapidly advances with high-tech products and processes requiring cutting-edge technology. Staying updated is crucial, as access to the latest advancements directly affects production efficiency and competitiveness. Having contacts within key markets Manufacturers must focus on cultivating robust connections with customers in major markets where end products are made. Strong relationships can enhance market presence and open opportunities for collaboration and growth in these strategic locations. 25 www.ibisworld.com December 2024 Global Manufacturing • C2524-GL Global Semiconductor & Electronic Parts Manufacturing Companies Key Takeaways The industry’s fragmented nature prevents one company from gaining significant market share. Even so, companies like  Major Players Intel or Samsung often dominate specific verticals like logic or Company Revenue Market Share memory chip manufacturing. Taiwan Semiconductor Manufacturing Company $69.1bn 6.8% Intel $40.7bn 4.0% Samsung $39.7bn 3.9% Many companies contract other foundries to produce chips. TSMC is the most prominent producer of “fabless” companies, supplying products for tech giants, including Apple, Tesla, NVIDIA, AMD and Sony. Qualcomm $35.8bn 3.5% Other Companies $826.8bn 81.7% Companies Market Share (%) Revenue ($m) Profit ($m) Profit Margin (%) Company 2023 2023 2023 2023 Taiwan Semiconductor Manufacturing Company 6.8  69,104.5  29,120.0  42.1  Intel 4.0  40,671.0  69.8  0.2  Samsung 3.9  39,732.5  1,007.7  2.5  Qualcomm 3.5  35,820.0  7,788.0  21.7  Broadcom 3.5  35,819.0  16,207.0  45.2  SK Hynix 2.5  25,075.4  -5,916.0  -23.6  Micron Technology 1.5  15,540.0  -5,745.0  -37.0  Taiwan Semiconductor Manufacturing Company Company Details Registered Name Taiwan Semiconductor Manufacturing Company Limited Industry Revenue (2023) $69.1bn Industry Profit (2023) $29.1bn Total Employees (2023) 76,478 Industry Market Share (2023) 6.8% Description 26 www.ibisworld.com December 2024 Global Manufacturing • C2524-GL Global Semiconductor & Electronic Parts Manufacturing Founded in 1987, Taiwan Semiconductor Manufacturing Company (TSMC) is headquartered in Hsinchu, Taiwan. As a leading player in the semiconductor industry, TSMC specializes in the manufacturing and design of integrated circuits. Renowned for its innovation and advanced technology, TSMC fabricates chips for major tech companies globally, revolutionizing sectors like consumer electronics, automotive, and telecommunications. The company's strategic focus on cutting-edge research and development positions it at the forefront of semiconductor production. Company’s Industry Revenue, Market Share, and Profit Margin Over Time Year Market Share (%) Revenue ($m) Profit ($m) Profit Margin (%) 2019 3.7 34,295.1 11,843.0 34.5 2020 4.7 44,629.8 18,447.6 41.3 2021 5.0 56,378.6 22,541.9 40.0 2022 6.7 75,549.3 36,586.8 48.4 2023 6.8 69,104.5 29,120.0 42.1 2024 8.3 89,052.7 39,429.7 44.3 What's impacting Taiwan Semiconductor Manufacturing Company's performance? TSMC announces a $40.0 billion investment in US facility • Following the CHIPS and Science Act and favorable investment policies, TSMC plans to build two Arizona manufacturing plants worth $40 billion. This investment ranks among the largest foreign commitments in U.S. history, aiming to supply nearly all domestic semiconductor demand across consumer electronics, healthcare, and automotive sectors. • Experts have scrutinized the deal, citing higher wage and production costs in the United States than in most Asian countries. Company officials also worry about splitting TSMC's research and development team, stunting innovation. Overall, the move could heavily reshape the semiconductor landscape. Intel Corporation Company Details Industry Revenue (2023) $40.7bn Industry Profit (2023) $69.8m Total Employees (2023) 130,700 Industry Market Share (2023) 4.0% Description Headquartered in Santa Clara, CA, and established in 1968, Intel Corporation (Intel) is the industry's largest player. Intel designs and manufactures advanced integrated digital technology platforms consisting of microprocessors and chipsets, sometimes enhanced by additional hardware, software and services. Intel sells platforms to the computing and communications industries, used in personal computers (PCs), servers, tablets, notebooks, smartphones, automobiles, automated factory systems and medical devices. The company's products include microprocessors, chipsets, motherboards, wired and wireless connectivity products, NAND flash memory through a joint license agreement with Micron Technology Inc., communications infrastructure products, network and server storage products and software products. In 2021 (latest data available), Intel employed 121,100 people worldwide. 27 www.ibisworld.com December 2024 Global Manufacturing • C2524-GL Global Semiconductor & Electronic Parts Manufacturing Company’s Industry Revenue, Market Share, and Profit Margin Over Time Year Market Share (%) Revenue ($m) Profit ($m) Profit Margin (%) 2019 5.1 47,976.7 14,690.0 30.6 2020 5.4 51,911.3 15,785.3 30.4 2021 4.6 52,682.7 12,970.7 24.6 2022 4.2 47,290.5 1,750.5 3.7 2023 4.0 40,671.0 69.8 0.2 2024 3.6 38,705.0 730.5 1.9 What's impacting Intel Corporation's performance? Financial performance • Poor management, heavy competition in the PC market from AMD and weak demand has caused Intel's revenue to drop sharply in 2022 and 2023. In 2023, the company is expected to generate only $54.1 billion. According to the company's quarterly report, high inflation, rising interest rates and the war in Ukraine have driven weak performance. Intel completes a flurry of merger and acquisition deals • Recently, the company has focused on growth through consolidation efforts alongside organic growth. In the first quarter of 2022, Intel entered a definitive agreement to acquire Tower Semiconductor, a leading foundry for analog semiconductor solutions. In October 2020, Intel also signed an agreement with SK Hynix to divest its NAND memory business for $9.0 billion in cash. The companies will complete transaction in two closings. They completed the first closing on December 29, 2021. The second closing will occur after March 2025. Apple leaves partnership with Intel • In 2020, Apple, one of Intel's more prominent GPU clients, announced the company would stop purchasing Intel semiconductors. Instead, Apple has started to produce its own M1 and M2 chips, contracting TSMC. Intel has publically fallen behind on product innovation, encouraging Apple and many other prominent PC manufacturers, like Lenovo, to explore other options for GPUs. Apple's M1 chips have been extremely successful since their release in Q2 2021. Similarly, AMD has closed the gap with Intel, increasing its market share from 23.1% to 39.1% in the x86 CPU market, according to Statista. Samsung Company Details Registered Name Samsung Electronics Co. Ltd. Industry Revenue (2023) $39.7bn Industry Profit (2023) $1.0bn Total Employees (2023) 267,800 Industry Market Share (2023) 3.9% Description Samsung Group, a South Korean multinational conglomerate founded in 1938 and headquartered in Seoul, is renowned for its innovation. The company operates across sectors like consumer electronics, IT, mobile communications and device solutions. Key activities include manufacturing digital TVs, refrigerators, mobile phones, semiconductors and display panels. 28 www.ibisworld.com December 2024 Global Manufacturing • C2524-GL Global Semiconductor & Electronic Parts Manufacturing Other Industries • GLGlobal Consumer Electronics Manufacturing • GLGlobal Household Cooking & Appliance Manufacturing • GL Global Ship & Boat Building Company’s Industry Revenue, Market Share, and Profit Margin Over Time Year Market Share (%) Revenue ($m) Profit ($m) Profit Margin (%) 2019 5.9 55,708.4 6,718.5 12.1 2020 6.4 61,785.8 9,391.2 15.2 2021 5.9 66,615.1 12,301.6 18.5 2022 4.7 52,655.4 7,557.2 14.4 2023 3.9 39,732.5 1,007.7 2.5 2024 4.9 52,522.3 5,049.4 9.6 What's impacting Samsung's performance? Samsung announces next-generation DRAM • Samsung Electronics, a world leader in advanced semiconductor technology, announced the development of the industry's first 128-gigabyte (GB) DRAM to support Compute Express Link (CXL2.0. The company's new product represents the first step in commercializing cutting-edge, next-generation memory solutions. • The CXL 2.0 will support memory pooling, a revolutionary memory management technique that enables buyers to maximize efficiency and reallocate memory while lowering operational costs. This new product will complement the growing market for artificial intelligence and machine learning. Samsung competes with TSMC to develop next-generation nodes • Samsung is advancing its semiconductor capabilities by mass-producing 2nm chips at the Hwaseong plant in South Korea. Production is expected to hit 7,000 wafers monthly by Q1 2025. Plans for 1.4nm chip production at the Pyeongtaek 2 plant aim for a capacity of 3,000 wafers monthly. • The company is intensifying its competition with TSMC by advancing its "node shrinking" process. It's starting work on 2nm technology and planning a shift to 1.4nm soon, potentially outpacing TSMC's timeline by two years. Samsung reassured stakeholders of its foundry division's stability amid spin-off rumors, indicating its commitment to growth. Qualcomm Technologies Inc. Company Details Industry Revenue (2023) $35.8bn Industry Profit (2023) $7.8bn Total Employees (2023) 50,000 Industry Market Share (2023) 3.5% Description Qualcomm Incorporated (Qualcomm), founded in 1985 and headquartered in San Diego, CA, is a multinational semiconductor and telecommunications equipment company. The company designs, manufactures and markets its products worldwide, deriving most of its 29 www.ibisworld.com December 2024 Global Manufacturing • C2524-GL Global Semiconductor & Electronic Parts Manufacturing revenue from chipmaking and patent licensing. Qualcomm has several subsidiaries, including Qualcomm Technology Licensing Division and Qualcomm Technologies Inc. (Qualcomm Tech). Company’s Industry Revenue, Market Share, and Profit Margin Over Time Year Market Share (%) Revenue ($m) Profit ($m) Profit Margin (%) 2019 1.6 14,611.0 7,667.0 52.5 2020 1.7 16,298.0 6,255.0 38.4 2021 3.0 33,566.0 9,789.0 29.2 2022 3.9 44,200.0 15,860.0 35.9 2023 3.5 35,820.0 7,788.0 21.7 2024 3.6 38,248.7 11,126.8 29.1 What's impacting Qualcomm Technologies Inc.'s performance? Qualcomm partners with Microsoft to transform 5G connectivity • In 2022, Qualcomm revealed its partnership with Microsoft to deliver unique semiconductors for Microsoft’s cutting-edge chip-to-cloud solution for private enterprise networking designed to solve the technology adoption problem for enterprises to implement private 5G networks globally. The partnership will take advantage of the growing 5G network across the developed world, generating significant revenue streams. Qualcomm expects the partnership to reduce adoption barriers and operating costs for high-performance 5G connectivity solutions. The companies will also work together to create new generative AI for vehicles. Broadcom Company Details Registered Name Broadcom Inc. Industry Revenue (2023) $35.8bn Industry Profit (2023) $16.2bn Total Employees (2023) 20,000 Industry Market Share (2023) 3.5% Description Broadcom Inc., headquartered in San Jose, California, is a leading global technology company founded in 1961. The company specializes in designing, developing, and supplying various semiconductor and infrastructure software solutions. Catering to sectors such as data centers, networking, software, and wireless, Broadcom is known for its innovative approach and expansive portfolio. It drives advancements across various industries while fostering connectivity and digital transformation worldwide. 30 www.ibisworld.com December 2024 Global Manufacturing • C2524-GL Global Semiconductor & Electronic Parts Manufacturing Company’s Industry Revenue, Market Share, and Profit Margin Over Time Year Market Share (%) Revenue ($m) Profit ($m) 2019 2020 2021 Profit Margin (%) 2.4 22,597.0 3,444.0 15.2 2.5 23,888.0 4,014.0 16.8 2.4 27,450.0 8,519.0 31.0 2022 2.9 33,203.0 14,225.0 42.8 2023 3.5 35,819.0 16,207.0 45.2 2024 3.5 37,782.8 15,790.6 41.8 What's impacting Broadcom's performance? Broadcom remains active in the merger and acquisition market • Over the past five years, Broadcom has completed several acquisitions, including Symantec Enterprise Security business in 2019, CA Technologies in 2018 and Brocade Communications Systems in 2018. The acquisitions have helped Broadcom increase its market share and compete with more prominent memory chip manufacturers. • In 2023, Broadcom acquired VMWare, a cloud-based SaaS company, for $69 billion. Dominating the market of cloud computing, VMWare's integration into the company has the potential to shape the direction of Broadcom’s innovation. You can view and download more company details on my.ibisworld.com. 31 www.ibisworld.com December 2024 Global Manufacturing • C2524-GL Global Semiconductor & Electronic Parts Manufacturing External Environment Key Takeaways Manufacturers face heavy global regulations. Trade tensions between China and the United States have influenced the industry, causing significant upheaval. Many governments are readily investing in new semiconductor foundries. For example, the United States, European Union, China and Malaysia have set policies to encourage foreign investment. Regulation & Policy Assistance Moderate Moderate Increasing Increasing External Drivers What demographic and macroeconomic factors impact the industry? Global internet usage World GDP % Growth 90 8.0 60 4.0 30 0 0 -4.0 2013 2016 2019 2022 2025 2028 2013 2016 2019 2022 2025 2028 Source: IBISWorld Source: IBISWorld Growth in broadband connections and internet services has boosted demand for internet-connected electronics and their inputs, including electronic parts and semiconductors. Internet connections also indicate spending on communications infrastructure and data communications equipment. Global internet usage is expected to climb as the percentage of global households with at least one internet connection increases. World GDP influences consumer electronics, automotive tech and IT infrastructure purchases. Stronger global economies drive heightened consumer and business spending, which in turn drives innovation and production expansion. Conversely, economic downturns limit investment and constrain industry growth globally. As economic conditions fluctuate, they shape market dynamics and impact the industry's overall trajectory. 32 www.ibisworld.com December 2024 Global Manufacturing • C2524-GL Global Semiconductor & Electronic Parts Manufacturing Global research and development funding Global aggregate private investment Growth $ trillion 8.0 36 4.0 24 0 12 -4.0 0 2013 2016 2019 2022 2025 2028 2013 2016 2019 2022 Source: IBISWorld Increased global research and development funding propels the semiconductor and electronic parts manufacturing industry forward by driving innovation and enhancing production capabilities. This financial infusion accelerates technological advancements, enabling manufacturers to produce more efficient, faster and smaller components. This elevates the industry's performance, allowing it to meet rising consumer and business demands, attract investment and maintain a competitive edge in a swiftly changing market. 2025 2028 Source: IBISWorld Rising global aggregate private investment fuels the semiconductor and electronic parts manufacturing industry by driving innovation and scaling production. More capital allows for advanced research and development, acquisition of cutting-edge technology and expansion of facilities. This investment cycle spurs competition and growth, benefiting consumers with faster, more efficient electronic products and enhancing the industry's overall economic footprint. Total value of world trade Growth 30 15 0 -15 2013 2016 2019 2022 2025 2028 Source: IBISWorld The total value of world trade directly influences the global semiconductor and electronic parts manufacturing industry by driving the consumption of electronic devices. As trade grows, so does the need for advanced technology, spurring production and innovation in semiconductors. This robust relationship fuels industry expansion, bolsters supply chains and amplifies technological advancements, enabling manufacturers to meet diverse market needs efficiently. Regulation & Policy 33 www.ibisworld.com December 2024 Global Manufacturing • C2524-GL Global Semiconductor & Electronic Parts Manufacturing What regulations impact the industry? Waste Electrical and Electronic Equipment (WEEE) and other directives Significant legislation impacting the electronics industry includes the European Union's RoHS and WEEE directives, effective from 2006. RoHS restricts materials like lead and mercury in electronics manufacturing, influencing industry practices. WEEE aims to reduce environmental impacts by promoting recycling, decreasing landfill waste and holding producers responsible for waste management. The organization suggests similar measures in major jurisdictions like the US, Japan and China. Electronics standards Organizations like the International Electrotechnical Commission, the Electronic Industries Alliance and IPC set essential electronic standards. Companies pursue certifications like ISO 9001:2015 to bolster customer trust. This certification encompasses the design, manufacture and servicing of consumer electronics, ensuring quality and consistency across the industry. Such standards promote reliability and trust in consumer electronics, fostering a uniform level of excellence globally, which is crucial for competitive markets. Patent laws Intellectual property rights, such as patents, play a crucial role in the electronic component manufacturing industry, where innovation drives success. Companies must avoid patent infringement to avoid costly legal battles. These disputes can be financially damaging, particularly for smaller companies. Many businesses settle patent disagreements outside the courtroom to mitigate expenses and maintain operational focus. Conflict-free supply chains In 2013, the WSC adopted a Conflict-Free Supply Chain Policy to responsibly source minerals from conflict-affected regions like the Democratic Republic of the Congo. This initiative aims to promote ethical practices within the semiconductor industry. Despite various trade associations worldwide, the WSC is the most comprehensive global entity, striving to foster sustainable and conflict-free supply chains. US semiconductor exports to Chinese companies In October 2022, the Biden Administration banned exporting semiconductor manufacturing technologies and AI or supercomputing chips to China, impacting global supply chains as major manufacturers rely on US companies. Japan, the Netherlands and Taiwan followed with similar restrictions, isolating Chinese high-tech chip manufacturers. This coordinated move aims to curb China's technological advancements, highlighting geopolitical tensions in the tech industry and raising concerns about future supply chain stability. The Wassenaar Arrangement The Wassenaar Arrangement, launched in 1996, is a key multilateral export control regime with 42 member states, including the US, EU nations and Japan. It aims to curb proliferation by regulating the export of conventional arms and dual-use goods and technologies. Membership comes with a voluntary adherence to guidelines on arms exports and sensitive technologies, fostering global security and cooperation. Assistance What assistance is available to this industry? Government Tariffs Import tariffs for the Global Semiconductor and Electronic Parts Manufacturing industry tend to be low because of the significant need across various sectors. Restricting imports can hinder consumer spending, industrial growth and defense capabilities by limiting technological advancements. Despite these concerns, trade tensions and tariffs between China and the US have impacted the industry, discouraging protectionist policies that could further restrict trade and technological progress. Government Direct government support Many governments support local electronic manufacturers through direct and indirect means, like favored government procurement and access to domestically developed technologies. The US's Committee on Foreign Investment (CFIUS) rigorously reviews foreign investments to protect national interests. Malaysia's incentives to boost manufacturing include tax waivers and investment allowances. Global government support has surged post-pandemic, aiming to enhance economic outputs through favored treatment and investment incentives. Government 34 www.ibisworld.com December 2024 Global Manufacturing • C2524-GL Global Semiconductor & Electronic Parts Manufacturing The US Innovation and Competition Act (USICA) In July 2022, the US Senate passed the USICA, allocating $250 billion to enhance national semiconductor production and other high-tech initiatives. Of this, $52 billion goes to the CHIPS for America Act, promoting domestic semiconductor manufacturing through tax credits available until 2026. Notably, TSMC and Intel plan over $40 billion in new facilities in Arizona. Meanwhile, European countries have introduced substantial incentives to attract Asian companies. Government Modernization programs Many countries offer public funding for research and development, alongside subsidies for start-up costs, to modernize economies. These incentives aim to boost technological innovation in underdeveloped regions, using direct funding, tax credits and special loans. Low-interest financing options also support these programs. Such assistance is common globally, as governments seek to foster economic growth and modernization through substantial financial backing. Non-government Trade associations Manufacturers tap into resources from trade organizations like the Semiconductor Industry Association (SIA) in the US and the European Semiconductor Industry Association (ESIA). Globally, entities like SEMI and the World Semiconductor Trade Statistics (WSTS) lead industry discussions. These groups provide advocacy and shield against restrictive legislation. They offer educational and networking opportunities, aiding manufacturers in understanding downstream markets and upstream suppliers, such as through the Consumer Technology Association (CTA). Non-government The World Semiconductor Council (WSC) The World Semiconductor Council (WSC) addresses industry challenges, promoting fair competition, technological advancement and sound environmental practices in line with WTO rules. Focusing on energy efficiency, the WSC encourages global collaboration in environmental conservation and intellectual property rights while setting objectives for chemical management, including risk assessment and pollution prevention. 35 www.ibisworld.com December 2024 Global Manufacturing • C2524-GL Global Semiconductor & Electronic Parts Manufacturing Financial Benchmarks Key Takeaways Companies are constantly innovating as demand conditions and capabilities evolve. Manufacturers must allocate significant budgets toward skilled labor and R&D. Manufacturers purchase a wide array of exclusive inputs. Companies purchase different metals and oxides depending on a product’s end use and must manage complex supply chains. Companies must maintain strong relationships with key suppliers. For example, ASML effectively has a monopoly on EUV lithographic presses that manufactures must navigate. Profit Margin 17.9 % Average Wage $67,238 Higher than sector Largest Cost Higher than sector Purchases 38.3% of Revenue Cost Structure Benchmarks Sector Industry Average operating costs by industry and sector as a share (%) of revenue 2023 0 10 20 30 40 50 60 70 80 Marketing Other Costs 90 100 Cost Structure (%) Purchases Profit Wages Utilities Depreciation Rent Source: IBISWorld What trends impact industry costs? Manufacturers constantly innovate, keeping wage costs high • Labor demand remains high, especially for positions like electrical engineers, even as many leading semiconductor manufacturers move production offshore to low-wage countries and automate most services. • Labor costs represent a smaller revenue share for passive electronics manufacturers than for semiconductor manufacturers. Manufacturers in developed nations will also have higher labor costs; for example, the CHIPS and Science Act has encouraged many producers to create new foundries in the United States, leading to higher wage costs. Many European countries have similar funding programs. • Companies must constantly create innovative products to maintain a competitive edge. For example, Intel has lost ground in the logic 36 chip market, while Samsung lags behind in memory markets. AMD and other fabless competitors have created increasingly competitive processors, outsourcing production to contract manufacturers, like TSMC. • Many products, like GPU and CPU, undergo massive yearly changes. A company's failure to match expectations can cripple growth for years; Intel's lack of recent success in CPU markets clearly expresses the need for massive investments in research and development and labor. Companies rely on raw materials • Manufacturers use various metals to develop semiconductors and electronic components. For example, manufacturers heavily use copper oxide, made from copper and oxygen, to carry an electric current in semiconductor manufacturing. Silicon and wafers are www.ibisworld.com December 2024 Global Manufacturing • C2524-GL Global Semiconductor & Electronic Parts Manufacturing • Manufacturers face significant input scarcity and many companies have invested more in reducing the consumption of silicon and scarce metals to reduce supply chain volatility. Companies must also purchase lithographic machines to create chips. Since ASML has an effective monopoly on these machines, machinery costs are high. • Fluctuating demand can lead to significant costs for companies, such as restructuring, resizing, or inventory write-downs. These shifts often necessitate strategic adjustments to maintain financial health and competitiveness, highlighting the importance of agile management and forecasting in navigating volatile market conditions. Traditional Service Economy Share of economy vs. Investment Producers combat volatile profit • Profit varies by company and operational segment. Companies with strong market positions, like Taiwan Semiconductor (TSMC), Intel and Samsung, often display robust profit. Similarly, Texas Instruments, a leader in analog semiconductors and embedded processors, often generates more profit than its peers. High • The world prices of silver, copper and molybdenum have increased, leading to higher purchasing costs. Companies also rely on silicon for production. These companies also use cobalt, lithium and numerous rare earth metals in production. Many of these supply chains have fallen under scrutiny since most rare earth metal mines operate under poor, near-slave-like conditions. New Age Economy Investment Economy Low • Contract work is also a part of purchases. Many specialized companies, namely TSMC, rely on contract manufacturing, testing and servicing for other manufacturers, including Apple, NVIDIA and ASM. electronic component sector, which is notably less capitalintensive. This disparity highlights the varying financial demands across segments in the electronics industry, affecting production strategies and potentially influencing company competitiveness and market dynamics. Share of Economy also major inputs. Traditional Service Economy Old Economy Labor intensive Capital intensive • Due to the commodity-like nature of most semiconductors, profit endures the peaks and valleys of memory, central processing unit (CPU), graphic processing unit (GPU) or printed circuit board prices. Investment • Also, poor management or unsuccessful innovation can cause a company to bleed money even following a strong year. In particular, major companies, namely Micron, Samsung, SK Hynix and Intel, have faced massive revenue drops over the past five years. Source: IBISWorld Companies face various depreciation expenses • Semiconductor and display panel manufacturing demand significant capital investment, contrasting with the passive Key Ratios Revenue Revenue Employees Employees Average Wages/ Estab. per IVA/ Imports/ Exports/ per Estab. per Ent. Wage Revenue Enterprise Revenue Demand Revenue (Units) (Units) ($) (%) (Units) (%) (%) (%) 40.4 80.5 91.3 97,255 22.0 1.1 51.2 8.0 8.0 449,301 42.0 82.2 93.4 91,799 20.4 1.1 53.9 9.4 9.4 474,326 41.0 76.8 86.4 93,166 19.6 1.1 50.3 11.8 11.8 35.7 70.3 78.9 84,496 18.7 1.1 37.7 11.5 11.5 44.9 70.4 79.9 88,655 15.8 1.1 54.7 14.7 14.7 48.0 72.3 81.8 86,901 14.8 1.1 49.2 17.0 17.0 47.8 73.1 82.1 78,059 13.4 1.1 38.4 16.5 16.5 per per Employee Enterprise Year ($) ($ Million) 2006 442,721 2007 2008 2009 451,888 2010 562,191 2011 586,413 2012 581,819 37 www.ibisworld.com December 2024 Global Manufacturing • C2524-GL Global Semiconductor & Electronic Parts Manufacturing Revenue Revenue Employees Employees Average Wages/ Estab. per IVA/ Imports/ Exports/ per Estab. per Ent. Wage Revenue Enterprise Revenue Demand Revenue (Units) (Units) ($) (%) (Units) (%) (%) (%) 46.9 74.5 83.2 74,490 13.2 1.1 37.3 15.4 15.4 47.3 78.4 88.2 82,780 15.4 1.1 40.1 15.7 15.7 per per Employee Enterprise Year ($) ($ Million) 2013 562,974 2014 535,879 2015 557,191 49.1 78.1 88.1 77,604 13.9 1.1 40.4 15.3 15.3 2016 540,587 49.5 81.4 91.7 77,250 14.3 1.1 40.6 15.8 15.8 2017 553,538 51.2 81.8 92.6 77,645 14.0 1.1 45.4 14.2 14.2 2018 548,897 52.4 84.4 95.4 76,208 13.9 1.1 42.8 13.0 13.0 2019 525,360 52.4 88.1 99.8 74,496 14.2 1.1 42.8 15.0 15.0 2020 518,835 52.6 89.7 101.4 75,938 14.6 1.1 43.6 15.0 15.0 2021 514,971 52.3 89.3 101.6 73,023 14.2 1.1 46.3 16.5 16.5 2022 483,837 49.8 90.5 103.0 67,959 14.0 1.1 47.3 20.2 20.2 2023 468,061 48.5 90.8 103.6 67,238 14.4 1.1 35.5 22.0 22.0 2024 479,286 50.1 91.5 104.5 68,708 14.3 1.1 40.6 21.7 21.7 2025 483,775 51.3 92.8 106.1 68,836 14.2 1.1 40.7 21.4 21.4 2026 490,337 53.0 94.4 108.2 69,023 14.1 1.1 40.8 21.0 21.0 2027 493,708 54.0 95.3 109.3 69,118 14.0 1.1 40.8 20.6 20.6 2028 496,676 54.8 96.1 110.4 69,201 13.9 1.1 40.9 20.3 20.3 2029 502,366 56.3 97.4 112.2 69,360 13.8 1.2 41.0 20.0 20.0 2030 507,339 57.7 98.7 113.8 69,497 13.7 1.2 41.0 19.7 19.7 38 www.ibisworld.com December 2024 Global Manufacturing • C2524-GL Global Semiconductor & Electronic Parts Manufacturing Key Statistics Industry Data Values Revenue IVA Establishments Enterprises Employment Exports Imports Wages Year ($ Million) ($ Million) (Units) (Units) (Units) ($ Million) ($ Million) ($ Million) 2006 1,190,820.8 610,114.2 33,431 29,476 2,689,775 95,557.9 95,557.9 261,592.9 2007 1,161,062.8 625,914.0 31,449 27,659 2,584,156 109,075.1 109,075.1 237,222.5 2008 1,076,397.6 540,927.6 29,540 26,253 2,269,320 126,799.9 126,799.9 211,423.2 2009 934,526.3 352,689.4 29,423 26,209 2,068,050 107,672.3 107,672.3 174,742.7 2010 1,112,582.4 608,735.6 28,109 24,762 1,979,011 163,891.4 163,891.4 175,448.6 2011 1,027,063.4 505,058.3 24,217 21,399 1,751,435 174,575.5 174,575.5 152,200.7 2012 944,815.1 363,023.4 22,221 19,770 1,623,898 155,606.5 155,606.5 126,759.6 2013 997,077.4 371,902.2 23,785 21,275 1,771,088 153,924.3 153,924.3 131,927.6 2014 1,031,667.1 413,588.1 24,569 21,822 1,925,186 162,467.6 162,467.6 159,366.0 2015 1,025,504.9 414,669.1 23,565 20,899 1,840,491 157,110.9 157,110.9 142,829.1 2016 982,660.2 398,482.9 22,344 19,832 1,817,765 154,825.9 154,825.9 140,422.4 2017 1,141,880.9 518,198.8 25,208 22,282 2,062,876 161,725.0 161,725.0 160,172.0 2018 1,285,275.5 550,591.8 27,728 24,533 2,341,562 166,448.7 166,448.7 178,444.8 2019 1,108,916.8 474,666.5 23,954 21,152 2,110,777 165,814.6 165,814.6 157,245.0 2020 1,117,863.1 487,378.7 24,021 21,241 2,154,562 168,041.9 168,041.9 163,613.2 2021 1,268,602.6 587,252.1 27,577 24,238 2,463,444 209,111.1 209,111.1 179,888.0 2022 1,174,808.4 555,360.6 26,840 23,582 2,428,110 237,832.7 237,832.7 165,012.5 2023 1,012,138.4 359,776.2 23,814 20,880 2,162,409 222,591.5 222,591.5 145,395.4 2024 1,067,628.6 433,280.5 24,337 21,320 2,227,541 231,830.5 231,830.5 153,049.3 2025 1,109,853.2 451,158.8 24,717 21,615 2,294,151 237,132.6 237,132.6 157,921.2 2026 1,153,066.2 470,004.3 24,917 21,742 2,351,581 242,334.6 242,334.6 162,313.5 2027 1,194,998.8 487,790.1 25,401 22,136 2,420,457 246,302.4 246,302.4 167,297.3 2028 1,237,108.0 505,591.7 25,920 22,561 2,490,774 250,846.1 250,846.1 172,364.5 2029 1,281,041.5 524,766.8 26,168 22,736 2,550,016 255,878.9 255,878.9 176,868.5 2030 1,327,091.0 544,737.7 26,505 22,989 2,615,785 260,957.4 260,957.4 181,789.4 Note Figures are inflation adjusted to 2024 39 www.ibisworld.com December 2024 Global Manufacturing • C2524-GL Global Semiconductor & Electronic Parts Manufacturing Industry Data Annual Change Revenue IVA Establishments Enterprises Employment Exports Imports Year % % % % % % % Wages % 2006 N/A N/A N/A N/A N/A N/A N/A N/A 2007 -2.5 2.6 -5.9 -6.2 -3.9 14.1 14.1 -9.3 2008 -7.3 -13.6 -6.1 -5.1 -12.2 16.3 16.3 -10.9 2009 -13.2 -34.8 -0.4 -0.2 -8.9 -15.1 -15.1 -17.3 2010 19.1 72.6 -4.5 -5.5 -4.3 52.2 52.2 0.4 2011 -7.7 -17.0 -13.8 -13.6 -11.5 6.5 6.5 -13.3 2012 -8.0 -28.1 -8.2 -7.6 -7.3 -10.9 -10.9 -16.7 2013 5.5 2.4 7.0 7.6 9.1 -1.1 -1.1 4.1 2014 3.5 11.2 3.3 2.6 8.7 5.6 5.6 20.8 2015 -0.6 0.3 -4.1 -4.2 -4.4 -3.3 -3.3 -10.4 2016 -4.2 -3.9 -5.2 -5.1 -1.2 -1.5 -1.5 -1.7 2017 16.2 30.0 12.8 12.4 13.5 4.5 4.5 14.1 2018 12.6 6.3 10.0 10.1 13.5 2.9 2.9 11.4 2019 -13.7 -13.8 -13.6 -13.8 -9.9 -0.4 -0.4 -11.9 2020 0.8 2.7 0.3 0.4 2.1 1.3 1.3 4.0 2021 13.5 20.5 14.8 14.1 14.3 24.4 24.4 9.9 2022 -7.4 -5.4 -2.7 -2.7 -1.4 13.7 13.7 -8.3 2023 -13.8 -35.2 -11.3 -11.5 -10.9 -6.4 -6.4 -11.9 2024 5.5 20.4 2.2 2.1 3.0 4.2 4.2 5.3 2025 4.0 4.1 1.6 1.4 3.0 2.3 2.3 3.2 2026 3.9 4.2 0.8 0.6 2.5 2.2 2.2 2.8 2027 3.6 3.8 1.9 1.8 2.9 1.6 1.6 3.1 2028 3.5 3.6 2.0 1.9 2.9 1.8 1.8 3.0 2029 3.6 3.8 1.0 0.8 2.4 2.0 2.0 2.6 2030 3.6 3.8 1.3 1.1 2.6 2.0 2.0 2.8 Note Figures are inflation adjusted to 2024 40 www.ibisworld.com December 2024 Global Manufacturing • C2524-GL Global Semiconductor & Electronic Parts Manufacturing Key Success Factors How do successful businesses overcome volatility? Adapt quickly to changing regulations Manufacturers must adhere to a varying array of regulations globally. Companies must rapidly adapt to shifting labor and environmental regulations and the latest trade war between the US and China alongside China's Micron ban are examples of rapidly changing regulations. Have a well-defined strategy Manufacturers must develop clear strategies and focus on core competencies to remain competitive. Rapid innovation creates an environment where competitors can quickly overtake others, requiring a directed and well-thought-out strategy. What products or services do successful businesses offer? Be an early adopter of new technologies This industry produces products incorporating a high level of technology, which advances rapidly. In addition, production processes can involve a high level of technology. Access to the latest technology is essential. Develop new products Manufacturers develop, produce and supply complex components often incorporated into complex end products. Production of these components often requires complex production technologies and highly skilled staff. How do businesses use location to their advantage? Having contacts within key markets Manufacturers must develop contacts and strong relationships with customers in key markets where end products are manufactured. Be willing to outsource when appropriate Outsourcing can reduce capital costs and enable companies to focus on core capabilities. More semiconductor companies that design and supply chips have chosen to outsource fabrication. How do successful businesses handle concentration? Economies of scale Large-scale manufacturing plants often achieve lower unit costs than smaller ones. Larger companies can negotiate effectively with suppliers and spread research, development and marketing expenses over a broader sales base, enhancing their competitive advantage. Willingness to outsource Outsourcing fabrication can lower capital costs for semiconductor companies, allowing them to concentrate on core competencies. Increasingly, chip designers and suppliers are opting for this model to optimize efficiency and stay competitive in the industry. How can potential entrants overcome barriers to entry? Secure the latest and most efficient technologies and techniques This industry rapidly advances by integrating highly sophisticated technology into its products and production processes. Given the swift pace of technological advancements, staying competitive depends on access to cutting-edge technology, which is crucial. Secure a highly skilled workforce Manufacturers develop, produce and supply complex components, often incorporated into complex end products. The production of these components often requires complex production technologies and highly skilled staff. Economies of scale Large-scale manufacturing plants often achieve lower unit costs than smaller ones. They negotiate better with suppliers and distribute research, development and marketing costs over a wider sales base. This efficiency enhances their competitive edge in the market. 41 www.ibisworld.com December 2024 Global Manufacturing • C2524-GL Global Semiconductor & Electronic Parts Manufacturing How do successful businesses compete with substitutes? Establish an efficient funding structure and efficient, cost-effective distribution channels Outsourcing cuts capital costs and lets companies concentrate on core capabilities. Many semiconductor firms that design and supply chips are increasingly opting to outsource fabrication, highlighting a strategic shift in the industry's operational approach. Develop strong technical product knowledge Manufacturers must continually innovate with new value-added products and robust technical expertise to remain competitive. Those lagging in innovation are swiftly outpaced by competitors, risking replacement in an industry where staying ahead is crucial. How do successful businesses manage buyer & supplier power? Secure the latest and most efficient technologies and techniques The industry rapidly advances with high-tech products and processes requiring cutting-edge technology. Staying updated is crucial, as access to the latest advancements directly affects production efficiency and competitiveness. Having contacts within key markets Manufacturers must focus on cultivating robust connections with customers in major markets where end products are made. Strong relationships can enhance market presence and open opportunities for collaboration and growth in these strategic locations. 42 www.ibisworld.com December 2024 IBISWorld helps you find the industry information you need fast. Disclaimer This publication has been supplied by IBISWorld Inc. and its Affiliates ('IBISWorld') solely for use by its authorized licensee and strictly in accordance with their agreement with IBISWorld. The publication is provided on an “as-is” and “as available” basis, and IBISWorld makes no representations or warranties, express or implied, regarding the merchantability, fitness for a particular purpose, completeness, or accuracy of the data or information contained herein. This publication is not intended to be advice and should not be relied upon as such. To the extent permitted by law, IBISWorld disclaims all liability for loss or damage, direct and indirect suffered or incurred by any person resulting from the use of, or reliance upon, the data in this publication. Copyright to this publication is owned by IBISWorld. All data, information, articles, graphs, and content contained in this publication are copyrighted works and IBISWorld hereby reserves all rights. The product is sold on the basis that the licensee agrees not to copy, reproduce, republish, upload to a third party, or distribute the content or any trade or service mark displayed within the product except in accordance with the agreement. In the event that the licensee is given written permission by IBISWorld to use or quote excerpts from the product, it will be sourced to IBISWorld. 2024 IBISWorld. All Rights Reserved www.ibisworld.com

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